10 Unique Ways To Fund Your Canadian Small Business

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Unique Ways To Fund Your Canadian Small Business

A good idea is the first step to starting a business. The second is finding a way to fund your business. In addition to the costs of buying the business, you’ll also need to consider labor, materials, rent, and utility expenses. We have compiled a list of unique ways to help fund your small business.

Crowdfunding

Crowdfunding is a practice that involves collecting small amounts of money from a large group of people. There are many online sites today dedicated to crowdfunding. If others believe in your product or idea, they may be willing to invest a small amount. Some business owners may offer equity shares in return for funding. The great thing about crowdfunding is that it isn’t technically a loan, meaning you don’t have to pay it back.

Peer-To-Peer Lending

Peer-to-peer lending is similar to crowdfunding, except that it involves a loan that must be repaid. You could also sell a small percentage of your business to friends or family who want to invest in your idea. This helps you acquire the funds you need and can help offset some of the risks of a small business.

Bank Loan

A bank loan is one of the most common ways to fund a small business. Bank loans typically have strict requirements, including proof of experience, a detailed business plan, and good credit. Bank loans also usually have strict repayment schedules. 

Before applying for a bank loan, make sure you have a detailed plan. Banking institutions usually require you to show how you’ll use the funds. They may want specific information on the business type and location you plan to open. For example, if you plan to purchase a restaurant in Toronto, you’ll need to demonstrate where the funds will go, whether it’s to the purchase price, build-out costs, or licensing and permitting fees.

Small Business Loan

Another small business funding option to consider is a loan through the Canada Small Business Financing Program. This government-based lender aims to increase the number of small businesses in the country by offering less strict requirements and better repayment periods. The application process is fast and easy, making it a good place to start.

Grants

Some organizations offer grants for aspiring small business owners. The application process for grants can be extremely competitive, but securing one can help you start a business without acquiring a lot of debt.

Personal Savings

If you have enough savings, you may fund your small business yourself. Cashing out your savings can help keep you out of debt. You also won’t have to pay expensive repayment fees or interest charges. Some people may choose to use their 401(k) or pension to fund a small business. 

Another option is your home equity. If you have owned your home for more than a few years, you may have built equity into it. Taking a cash-out home equity loan allows you to essentially restart your mortgage loan and collect the difference between the home’s value and your new loan amount in cash. However, most lenders do put a maximum of 80% limit on cashing out against your home’s value.

Credit Cards

Credit cards may be an option for the extra expenses that a small business requires, like supplies or uniforms. However, remember that credit cards often have high-interest rates, making borrowing money expensive. Most credit card companies also don’t allow you to pay things like rent or payroll.

Personal Loan

A personal loan may be an option for small business owners with excellent credit. Personal loans, however, typically have strict lending requirements and shorter repayment periods. One advantage of personal loans is that they’re typically unsecured, meaning failure to pay won’t lead to the repossession of your assets. Of course, you should only take out what you can comfortably repay. Avoid taking out the full amount available to you. You may rely on a personal loan later to expand your business.

Vendor Financing

Some vendors may offer financing if they believe in your product. Vendor financing consists of longer payment requirements on sourcing products in return for a higher rate. Vendor financing programs also usually require higher interest rates than when compared to bank or personal loans.

Venture Capital

Venture capitalists are groups of investors who help fund new businesses. Venture capital companies most commonly fund start-ups. However, they tend to be pickier when choosing the businesses they back. Acquiring lending from a venture capitalist may also require that you give up a certain percentage of business ownership.

There are many benefits to starting a small business, including flexibility and unlimited earning potential. However, starting a small business requires capital. Each of the methods listed above can help you bring your small business idea to reality.